BlogOntario welcomes Alberta, British Columbia, and Washington State to its list of peer jurisdictions

Ontario welcomes Alberta, British Columbia, and Washington State to its list of peer jurisdictions

November 18, 2015

A lot has changed over the past fourteen years. Ontario’s GDP has increased by 23 percent, manufacturing’s share of total employment fell from 18 to 11 percent, and the service sector now accounts for 77 percent of total GDP, up from 71 percent. [1] In other words, it is time to update Ontario’s benchmark for evaluation.

What are peer jurisdictions and why do we have them?

Next week, the Institute will be releasing its fourteenth Annual Report. In this report, the Institute continues to track and measure Ontario’s economic progress, which evaluates the province’s key economic indicators in relation to peer provinces and US states.

Peer provinces and states are selected based on their similarities to Ontario, in terms of industrial composition and population size. Over the course of the Institute’s existence, the list of peers has remained unchanged. However, in its upcoming Annual Report, the Institute introduces three new peer jurisdictions – Alberta, British Columbia, and Washington State.

Although the Institute only compares Ontario to three provinces and fifteen states, the analysis covers a substantial proportion of total North American economic activity and population. Together, Ontario, Québec, Alberta, and British Columbia account for 86 percent of both Canada’s total GDP and population.[2] In addition, the 15 peer states (which now include Washington) cover 68 percent of total US GDP, and 66 percent of the total American population.[3] Combined, these eighteen jurisdictions set the benchmark for evaluating Ontario’s prosperity.[4]

Snapshot of new peers

Comparing Ontario to the new peer states, both Ontario and British Columbia enjoy a similar level of GDP per capita. However, both provinces trail significantly behind Washington and Alberta.

Looking at productivity, the Institute’s research again finds that Ontario and British Columbia are very similar. In some sectors British Columbians are more productive, while Ontarians are in others. Washington and Alberta, on the other hand, are more productive than Ontario in nearly every sector of the economy.

New peers bring new insights

Comparative analyses shed light onto which economic development policies work and don’t work across jurisdictions.

British Columbia

British Columbia and Ontario share a similar level of productivity, GDP per capita, and industrial composition. Because these two regions are so similar, comparative analyses are rendered more meaningful. Policy-makers can use this kind of information to predict the impact that policies in one jurisdiction may have if implemented in the other. For example, experiences learned from British Columbia’s implementation of a carbon tax can shed light onto the potential implications of Ontario’s proposed cap-and-trade system.

Washington

Washington State provides an interesting case study for Ontario. In both goods and service-producing sectors, Washington’s workers are 1.54 and 1.43 times more productive than Ontarians, respectively. How can a region with a similar industrial composition enjoy such a high level of prosperity and productivity? What makes Washington so successful – is it their tax policies, educational institutions, cluster development, or some other initiatives?

Alberta

Alberta’s economy may be quite different from Ontario’s, but there are key reasons for including this oil-driven economy in our list of peer jurisdictions. Although Alberta’s industrial composition differs from Ontario’s, workers in Alberta are more productive than Ontarians across every sector of the economy. What has Alberta done to ensure that not only the mining sector, but every sector of the economy, is so productive?

Looking ahead

The Institute’s focus has recently shifted away from a retrospective analysis and toward a view of where Ontario is headed. In line with this change in focus, the benchmark has been set even higher. The addition of these new peer jurisdictions will allow the province to monitor their economies in order to learn from best practices, catch up in key indicators, and ultimately surpass their performance.